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Is it essential for the CIO to report to the CEO?

Is it essential for the CIO to report to the CEO?

CIOs should take caution in interpreting the fact that they may not report to the CEO as evidence that their strategic contribution is not appropriately recognised.

Is it essential for the CIO to report to the CEO? The reporting relationship of CIOs is frequently an area of curiosity and sometimes concern for Gartner Executive Programme members. It is also a question that Gartner asked of more than 2000 CIOs worldwide in our latest annual CIO survey, which tracks how CIOs balance their business, strategic, technical and management priorities. The survey report aggregates the responses from CIOs in 50 countries across 38 industries, representing more than US$160 billion in corporate and public sector IT spending. I’ll go into more detail about the findings of this year’s survey in a later column.

Globally, a minority of CIOs (38 percent) report directly to their CEO. This situation has remained remarkably consistent over the period in which this question has been part of the annual survey.

From Gartner's EXP Global CIO Survey.

Source: Gartner (January 2011)

The Asia Pacific survey results show the number of CIOs reporting to the CEO in our region is similar. Forty percent of APAC CIOs report to the CEO, 14 percent to the CFO, 16 percent to the COO and a significant 30 percent state that they report to the ubiquitous “other”.

CIOs should be careful when interpreting the fact they may not report to the CEO as evidence that their strategic contribution is not appropriately recognised. Gartner does not believe CIOs should report to the CEO in all cases, or by default. Consider the following analysis in terms of your own circumstances.

Current practice is for Boards to counsel CEOs not to let their personal span of control (total number of direct reports) become too broad. Therefore a CIO must justify his or her occupancy of a direct reporting line.

Typically, CEOs build teams around them that include:

Legal, fiduciary, regulatory or company constitution required roles such as CFO, Legal Counsel, Company Secretary. These roles are usually permanent members of the CEOs team of direct reports.

Roles that represent ongoing core operations pertaining to the industry sector, for instance COO or Head of Manufacturing in FMCG organisation. These are usually also permanent direct reports also.

Then there are a number of roles that may be required during special events, for instance M&A activity, or roles that involved in enacting specific strategic changes. These direct reports may be transient depending upon their ongoing accountabilities post the special event, and the circumstances of the organisation.

The CIO may occupy a permanent or semi-permanent seat on the CEO’s direct team. A permanent CIO seat is typical of an organisation where the business model is highly dependent on an online commercial enterprise, for example a bank. A semi-permanent seat for the CIO may be established by a more traditional business undergoing a period of high risk or strategic change, whether internally driven or caused by externalities.

Gartner research has distilled 10 factors that typically give rise to the CEO having the CIO as a direct report. These factors fall into two categories – those related to the corporate situation, and those related to the personal attributes and capabilities of the CIO.

Corporate-related

* Where the company or industry is highly information-intensive. Ready examples of this are banking and media.

* Where creative IT-related insight is necessary, including periods where innovation is competitively essential.

* While technology-related business model transformation is taking place – such as is the case in Australian and New Zealand retail markets currently.

* Frequently, although not always, where a technology-dependent company transformation is taking place, for example merger or acquisition activity

* Where the company is embarking on major IT platform changes, for example significant outsourcing or critical application systems implementation

* During a period of increased information-related threat or risk, for example cyberwarfare, industrial espionage, significant regulatory compliance and so on.

Person-related

* Where the CIO also has another C-suite role, for example CFO, COO, head of shared services and so on.

* Where the CIO is the close personal advisor of the CEO – possibly based on having worked together successfully in previous organisations

* Where the CIO plays the role of “custodian of the firm”, with expansive knowledge and experience to guide a new or young CEO

* Where the CIO role is used as a development opportunity for a potential successor of the COO, CFO and so on. With an increasing number of CIOs now being drawn from non-technology backgrounds, this is indeed an increasing trend.

Consider putting forward these 10 factors as a conversation-guiding checklist when the CEO or CIO believes a direct reporting line might be established or reviewed. But also keep in mind there is no “one size fits all” solution – and that only 30 percent of CIOs report to the CEO in our region. Particular circumstances of the organisation and the individuals concerned are the greatest determinant of the reporting line of the CIO.

Linda Price (linda.price@gartner.com) is vice-president of executive programmes at Gartner

To comment on this article, please email the editor.

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